What is an S-Corporation?

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Category : > S Corporation

Posted On : Thu Aug 27th,2009

An "S-Corporation" is a regular corporation that has between 1 and 100 shareholders and that passes-through net income or losses to shareholders. An S Corp is a corporation that elects to be treated as a pass-through entity (such as a sole proprietorship or partnership) for tax purposes.

An "S-Corporation" is a regular corporation that has between 1 and 100 shareholders and that passes-through net income or losses to shareholders. An S Corp is a corporation that elects to be treated as a pass-through entity (such as a sole proprietorship or partnership) for tax purposes. Since all corporate income is "passed through" directly to the shareholders who include the income on their individual tax returns, S Corporation are not subject to double taxation.

An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of non-separately stated income or loss.

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Comments (10)

InfoTaxSquare.com wrote on : Sat Dec 05th,2009

S-Corporation is a pass through entity. Profit or loss pass through to your personal income tax return to calculate taxes. But to decide the structure of your business we strongly recommend to consult either your attorney or accountant.

Gerard wrote on : Sun Jan 03rd,2010

I am a share holder in an s corporation. The president of this corp. told me that I should give him all my fuel receipts, that it would give me more equity in the company.
This doesn't sound correct to me, please help.

Reply : infotaxsquare.comDear
Gerard,

First we thank you for choosing InfoTaxSquare.com for your business needs. As far as my knowledge is concerned It does not make sense. Fuel receipt can only allow you to claim legitimate expense for your business.

InfoTaxSquare.comDocuments FilingDepartment!

Dragvon J wrote on : Tue May 04th,2010

Need help becoming an LLC or to incorporate.

Reply : infotaxsquare.comS corporation's special tax status eliminates double taxation, it lacks
the flexibility of an LLC in allocating income to the owners. An LLC may offer
several classes of membership interests while an ‘S’ corporation may only have
one class of stock. An LLC is a pass-through tax entity. This means that the
income to the entity is not taxed at the entity level. Whereas Corporations are
treated as a separate legal taxable entity for income tax purposes. Therefore,
corporations pay tax on their earnings

You may also read our article on this page for difference between Corporation and LLC.

Johnny Blessing wrote on : Fri Jan 14th,2011

I have a corporation named 8050 swiss which i have never used but have filed every year. i have a company that is not under this corporation but would like to place under this corporation. what is the proceedure to do so.

Reply : infotaxsquare.com
Dear Johnny Blessing,

Thanks for choosing InfoTaxSquare.com four your business needs. I am assuming that you want to form a holding company. In this case you need to file a "Article of Amendment". If you still have any question please do not hesitate to contact us.

As the sole owner and only employee of a home based (hobby) business, should I file as an "S Corp" or LLC, when wanting to open a seperate bank account. I am employeed full time by another company.
My product (hand crafted jewelry) will be sold on the internet, and initially payments will go through "Paypal". Once I become more established, I would possibly open a "merchant account" through my bank.

Reply : infotaxsquare.com
Dear Robin,

Thanks for choosing InfoTaxSquare.com for your business needs. For small business S-Corporation should be fine but still we recommend you to do your research before choosing a right structure for your business. You can use the following link to decide whether you should choose S-Corporation or an LLC for your business. If you have any question please call us at 516.822.3100 for free consultation.

hi , im about to open a locksmith business , and im wondering in witch category i should put it on .... c , or s or LLC ...
if anybody can suggest me witch one is better/smarter for me , i'll be very thankful ,,,

Reply : infotaxsquare.com
Dear Jonathan:

Thanks for choosing InfoTaxSquare.com for your business needs. We would suggest you to Form an S Corporation. For more details you can either use the following link or call us at 516.822.3100.

As the sole owner and only employee of a home based telecommunication business, my sales for (2/2012- 11/2012) this relatively new idea of mine went belly up with sales accounts I'm too embarrassed to mention even with using the NJ Sales Tax Rate Calculator here. I know that I haven't paid quarterly, and I am subject to possible fines and penalties for late sales tax payment. The Form 1120S, is recommended, I am sure where I stand as far as how much I should Pay from my book keeping ledger, but my greatest concern are penalties. Is there an amount that someone like myself falls under, meaning is there a financial bar that if crossed, mandates a payment to the IRS, or does a S corporation get some type of "default to owe" due to the low income??

Reply : infotaxsquare.com
Dear Zeddie:

Thanks for choosing InfoTaxSquare.com for your business needs.We suggest you to please either contact to your accountant or departments.

Thank you for the info and helping me set up my business. I have a question about switching to an S Corp. and what is involved, What are the Advantages, and what info I need to put it in a trust?

Reply : infotaxsquare.com

Setup an S-Corporation

Dear Sandra Bruce:

Thank you so much to choose InfoTaxSquare.com for your business needs again.The main advantage operating business under a corporation, you keep your personal assets separately.y You can setup your payroll.

Biggest disadvantage of Sole Proprietor:

Sole Proprietor & Business Debts

Legally, a sole proprietorship is inseparable from its owner -- the business and the owner are one and the same. As a result, the owner of a sole proprietorship is personally liable for the entire amount of any business-related obligations, such as debts or court judgments. This means that if you form a sole proprietorship, creditors of the business can come after your personal assets -- your house or your car, for example -- to collect what the business owes them.

We strongly suggest you to please check to an attorney for any legal advise.